Porsche's Governance Crisis and Valuation Deterioration: A Dual Leadership Dilemma

Porsche AG, once a paragon of automotive luxury and profitability, now finds itself at a crossroads. Since its 2022 stock market debut, the company's valuation has plummeted by roughly 45%, a stark contrast to its initial optimism of outperforming its parent company, Volkswagen. This decline is not merely a function of market volatility but a symptom of a deeper governance crisis: the unresolved dual leadership of Dr. Oliver Blume, who simultaneously serves as CEO of Volkswagen AG and Chairperson of Porsche's Executive Board. As shareholders and corporate governance experts grow increasingly vocal, the question looms: Is Blume's dual role a drag on Porsche's long-term value, and does the board's inaction signal systemic flaws in the Volkswagen Group's corporate structure?

The Dual Role: A Strategic Contradiction

Blume's dual leadership, initiated in 2022, was initially framed as a strategic necessity. Volkswagen, reeling from the fallout of Herbert Diess's ouster, needed a steady hand to navigate its transformation into an electric vehicle (EV) leader. Porsche, meanwhile, required a leader to steer its transition from a niche sports car brand to a global EV contender. On paper, Blume's cross-appointment seemed to align these goals. In practice, it has created a conflict of interest that investors now view as untenable.

Porsche's struggles in key markets—particularly China—highlight the risks of divided attention. The brand reported a 42% sales drop in China during the first quarter of 2025, a market where domestic EV manufacturers like BYD and NIO have captured consumer loyalty. Blume's “China speed” strategy, while ambitious, has yet to translate into tangible results. Meanwhile, Volkswagen's Chinese joint ventures have seen operating income shrink from €4.4 billion five years ago to €1.74 billion in 2024. The dual role, critics argue, has left Blume unable to fully commit to either company's urgent needs.

Governance Failures and Shareholder Frustration

The Volkswagen Group's supervisory boards have faced mounting criticism for their lack of action. Despite repeated calls from shareholders—including prominent voices like Hendrik Schmidt of DWS and Ingo Speich of Deka Invest—Blume remains in both roles, with no clear succession plan for Porsche. This inaction reflects a broader governance weakness: the inability to enforce accountability in a complex, multi-brand structure.

Porsche's board has also been criticized for its handling of strategic realignment. The company's cost-cutting program, which includes 3,900 job cuts by 2029, and its pivot to plug-in hybrids and EVs, while necessary, have been executed without the clarity or urgency demanded by the market. Shareholders argue that a single, focused leader could have accelerated these efforts, particularly in China, where Porsche's EV market share remains outside the top 10.

The Volkswagen Group's Structural Vulnerabilities

Blume's dual role is not an isolated issue but a symptom of the Volkswagen Group's sprawling, hierarchical structure. As the parent company to brands like Audi, Lamborghini, and Porsche, Volkswagen's governance model relies on centralized oversight. However, this model falters when a single executive is tasked with managing divergent brand strategies. Porsche's premium positioning and niche market demands, for instance, clash with Volkswagen's mass-market EV ambitions.

The situation mirrors Elon Musk's dual leadership of Tesla and SpaceX, though with a critical difference: Musk has increasingly prioritized Tesla as the EV market intensifies. Blume, by contrast, has offered no such clarity. His insistence that the dual role is “not intended to last forever” rings hollow without a timeline or contingency plan. This ambiguity has eroded investor confidence, contributing to Porsche's valuation discount relative to its peers.

Investment Implications and the Path Forward

For investors, Porsche's governance crisis raises red flags. The company's ability to execute its EV strategy, stabilize its Chinese operations, and rebuild shareholder trust hinges on resolving the leadership dilemma. Until Blume steps down from one role or the board enforces a succession plan, Porsche will remain vulnerable to volatility and strategic missteps.

The broader Volkswagen Group also faces reputational and financial risks. If Porsche's struggles spill into its core brands, the group's diversified model could unravel. Investors should monitor two key indicators:
1. Leadership announcements from Volkswagen and Porsche's supervisory boards. A clear timeline for Blume's transition would signal improved governance.
2. Porsche's EV market share in China. A rebound in sales would validate the “China speed” strategy and restore investor confidence.

In the short term, Porsche's stock remains a high-risk proposition. However, a resolution to the governance crisis—whether through leadership changes or strategic clarity—could unlock long-term value. For now, investors would be wise to approach Porsche with caution, while keeping a watchful eye on the Volkswagen Group's structural reforms.

The automotive industry is at a pivotal moment, and Porsche's ability to navigate it will depend not just on electric vehicles, but on electric governance.